Tuesday, June 30, 2009

Many of the same people who brought us the current economic collapse - the left generally, with Barney Frank, ACORN and Obama in particular - are at it again. Rather than fixing the problems they created over two decades, each are doubling down. Obama is planning to vastly exand the Community Reivestment Act. Barney Frank is pushing a new version of subprime lending on Fannie Mae. ACORN is out thugging the major mortgage brokers. But a speed bump may now be in their path. The Supreme Court decision in Ricci yesterday might actually be the tool that defangs the racially charged Community Reinvestment Act and curbs some its abuses by the Masters of Disaster.

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We are in the worst recession since the Great Depression because of a catastrophic failure of the mortgage loan market. At the very heart of that failure is the racially charged Community Reinvestment Act. (For an in-depth discussion of the CRA and its impact on our economy, please see Hurricane Subprime, 1977-2000.) Without that, we have no economic collapse.

There were the bond rating services that inexplicably and wholly misrated mortgage backed securities. There is mark to market accounting rules that require corporation to show mortgages that cannot be sold in the current collapsed market as having no value, irrespective of the fact that they do have value. And we had the derivative market that failed catastrophically when the entire mortgage market failed. All these played ancillary roles in the meltdown that has had a severe domino effect throughout our economy.

But all of that has gone down the memory hole with the left in complete charge of the government. No hearings have been held on the causes of this economic nightmare. If you listen to Barney Frank, he has always been the paragon of fiscal responsiblity. If you listen to Obama, the CRA played no role in the meltdown, it was all the fault of evil capitalist pigs on Wall St. Indeed, instead of fixing any of the above problems, Obama, Frank, and ACORN are busy doubling down.

As to Barney Frank, this from the WSJ documents his latest insanity:

Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to "roll the dice" in the name of affordable housing. That didn't turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity -- with your money. He and New York Representative Anthony Weiner have sent a letter to the heads of Fannie and Freddie exhorting them to lower lending standards for condo buyers.

You read that right. After two years of telling us how lax lending standards drove up the market and led to loans that should never have been made, Mr. Frank wants Fannie and Freddie to take more risk in condo developments with high percentages of unsold units, high delinquency rates or high concentrations of ownership within the development. . . .

Fannie and Freddie have always been political creatures under the best circumstances. But we don't remember anyone electing Mr. Frank underwriter-in-chief of the United States.

Read the whole article. Frank is, I've long maintained, a clear and present danger to the United States.

ACORN, for its part, is out doing what it does best - strong-arming financial institutions. This from the American Spectator:

ACORN, which played a starring role in creating the subprime mortgage crisis, plans to add insult to injury by harassing lenders across the nation with protests tomorrow in an effort to coerce them into supporting President Obama's Making Home Affordable foreclosure-avoidance program.

Austin King, director of ACORN Financial Justice, sent out a press release today advising of the demonstrations that are planned as part of its "Homewrecker 4" campaign. The four financial companies targeted are Goldman Sachs, HomEq Servicing, American Home Mortgage, and OneWest. . . .

But let's not forget that ACORN helped to cause the mortgage bubble by strongarming banks into making loans they shouldn't have. And cheering them on was ACORN's lawyer, Barack Obama, who contributed to the increasingly hostile environment for banks when he represented plaintiffs in the 1995 class action lawsuit Buycks-Roberson v. Citibank. The suit demanded that Citibank grant mortgages to an equal percentage of minority and non-minority mortgage applicants. The bank settled the case three years later and reportedly agreed to beef up its lending to unqualified applicants. . . .

But the worst of the worst is Obama and his plan to put the disasterous Community Reinvestment Act on steroids as part of his 89 page proposal for massive government intervention in our economy, “A New Foundation: Rebuilding Financial Supervision and Regulation.” The CRA uses an analysis precisely like that in a "disparate impact" claim under Title VII to determine whether financial institutions are making enough loans to minorities. As it stands now, banks cannot defend against a finding of insufficient loans to minorities under the CRA by pointing to their individual portfoloio to show that they have not engaged in discrimination, but rather have applied loan standards evenly and without reference to color. The government applies the CRA to require a racially balanced result.

You will recall that yesterday, the Supreme Court decided in Ricci that application of legitimate, race neutral criteria was what Title VII required and that it would be an unlawful act of racism for an institution to throw out the results of a test because it did not provide a racially balanced result. Though decided in the context of Title VII, Ricci provides a general principle of law that should be applicable to the misuse of the CRA by our government to engage in outcome oriented, social engineering. One can only hope that some attorney, somewhere, is polishing the Ricci decision and preparing to use it as the centerpiece against the CRA. That would go a long way to defanging Obama, Frank, and ACORN.